A company whose CEO is a longtime political contributor to Rick Perry is in negotiations to receive an economic development funding grant from the governor’s office.

The Automobile Club of Southern California, a AAA affiliate, is in talks over a potential Texas Enterprise Fund grant to support an expansion of its Texas subsidiary, AAA Texas. Thomas McKernan, the company’s president and CEO, has donated thousands of dollars to Perry and helped raise money for the governor’s failed 2012 presidential campaign.

“Representatives of ACSC and the Governor have entered into confidential economic development negotiations involving a possible grant under the Texas Enterprise Fund to support ACSC’s possible expansion of its operations in Texas,” Malek Khouri, the company’s vice president of administrative services, wrote in a letter to the Office of the Attorney General to appeal the release of the company's application as requested by The Texas Tribune through an open records request.

Khouri said the company sought to protect its "competitive position" in the negotiations as well as confidential commercial and financial information included in the application.

The taxpayer-funded Texas Enterprise Fund is used to award millions in tax dollars to businesses looking to relocate to the state or expand existing operations. The award money is used as a financial incentive to close deals with businesses that are in turn expected to create jobs in the state.

McKernan has contributed at least $23,750 to Perry since 2002. Perry initially reached out to McKernan about bringing jobs to Texas in 2009, according to various press reports. In 2011, McKernan served as a co-finance chairman of the Perry presidential campaign’s California finance team. On the same day that the Perry campaign announced its finance team, McKernan was part of a host committee that organized a fundraiser for Perry in California, contributing $10,000 himself. This September, Perry attended the AAA Texas/National Hot Rod Association Fall Nationals as McKernan’s guest.

Watchdog groups have criticized Perry over the use of such funds, saying they promote “crony capitalism” by providing handouts for corporations and executives that support him.

Asked about the AAA Automobile Club of Southern California application, Andrew Wheat, research director of the liberal watchdog group Texans for Public Justice, said there’s a lack of “checks and balances” to prevent the perceived conflicts of interest.

“This is one of the chief concerns about the Texas Enterprise Fund,” Wheat said. “You’ve got a large pot of taxpayer money that’s essentially being controlled by the state’s three top leaders who can use it as a political slush fund.”

The governor’s office did not comment on the negotiations or a possible conflict of interest.

“As a practice, we don’t confirm any potential ongoing negotiations,” said Lucy Nashed, a Perry spokeswoman.

The governor’s office has previously denied that politics influence Perry’s decision-making on what companies receive incentives through the fund. Perry has said that the Texas Enterprise Fund has helped bring several companies to Texas, bringing thousands of jobs and billions in capital investment to the state.

Calls seeking comment from McKernan at the ACSC were directed to AAA Texas, which declined to comment further.

Linda von Quintus, AAA Texas’ vice president for government and community affairs, referred questions on the negotiations and a possible conflict of interest to Khouri’s appeal letter.

“We’re going to let the document speak for itself,” she said.

Von Quintus did confirm that the company’s Irving-based Texas subsidiary plans to expand local operations. The expansion was set in motion earlier this year when AAA Texas purchased two buildings in Coppell to house its regional headquarters.

The Texas Enterprise Fund, which was created in 2003 by the Texas Legislature at Perry's request, awards grants at the governor’s discretion with prior approval from Lt. Gov. David Dewhurst and House Speaker Joe Straus. Since its creation, Perry has awarded more than $487 million in grants, although not all the award money has been distributed.

Perry has collected more than $2 million in contributions from executives, political action committees or investors tied to companies that have received Texas Enterprise Fund awards, according to an April report by Texans for Public Justice.

Dewhurst has received more than $1.3 million in similar contributions, and Straus has taken in $232,800.

Other Perry contributors whose companies have received Texas Enterprise Fund grants include Joe Sanderson of Sanderson Farms, which received a $500,000 grant in 2006, and Drayton McLane of McLane Advanced Technologies, which received a $1 million grant in 2009.

Sanderson and McLane have contributed at least $105,000 and $249,000, respectively, to Perry since 2003.

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